September 18, 2014

Creighton survey: federal tax issues cause businesses to hold off hiring

A survey finds concern over looming federal tax increases may be keeping businesses in Iowa and across the region from expanding and hiring. For the fourth time in five months, the leading economic indicator dropped in Creighton University’s monthly survey of supply managers and business leaders.

Creighton economist Ernie Goss says the region’s number fell to 48 in November. “The numbers stretch from zero to 100,” Goss says. “Anything above 50, we assume is growth and 50 is growth neutral. It went well below growth neutral after being above 60 the previous month. We can trace that to what’s going on or what’s not going on in Washington, what’s called the fiscal cliff, that record tax increase.”

While growth is stagnating in the nine-state Midwest region, the survey found Iowa’s economy is still growing, slightly, with a rating near 53. Iowa’s number has been above “growth neutral” now for 35 months in a row. Goss says the region’s employment numbers are holding relatively steady, with states like Iowa seeing a drop in the jobless rate to five-point-one percent in October.

“It was not great news but it was certainly better than other numbers in the report,” Goss says. “For example, inventories were down and that’s in anticipation of slower sales, slower growth in the months ahead, so the business confidence was down but employment was up a bit.”

The national unemployment rate in October was 7.9%. As part of the survey, Goss says they asked employers if they planned to boost pay to their employees. “How much do you expect wages to grow for your company over the next year?” Goss says.

“You’d like to see that in the three to four to five-percent range. It was down. Almost one-third expect to see no wage increase over the next year.” On the plus side, Goss says Iowa has bucked the trend in the region this year by adding both durable and non-durable goods manufacturing jobs.

He says the surveys continue to point to growth for both manufacturing and non-manufacturing in Iowa, but at a slower pace.